In the early years, I wasn’t more forceful or clear with people when their goals were unrealistic, when their market assumptions about returns were overly generous and when their spending patterns were too high.

It has a lot to do with assumptions around returns and markets and how strategic they need to be with their long-term goal. I was not giving enough education and clarity about what to expect if you kept having those incorrect assumptions long term.

Long-term investment planning has a lot to do with different assumptions, different asset classes and different scenarios, all sorts of variables. But when people sort of gaze into their future, they always see things as, “This will produce a great return” and, “This great real estate I have will be three or four times more valuable.” And that’s just not always true.

People never wanted to take into account loss of jobs, market turndowns and health issues.

The Lesson:

Because I knew those assumptions were probably inaccurate, I should have spent more time educating them: "If these assumptions are true, you’ll be all the much better, but we need to plan for a more conservative scenario."

People never wanted to take into account loss of jobs, market turndowns and health issues, and they do happen.

[During the recession] I think people kind of turned the opposite way and became too pessimistic. You couldn’t get people to see that there would be upwardly good markets and upward appreciation. Everybody was, “Oh, that’s just going to happen again.”

Then I was in the position of trying to counsel people that what’s right in front of you is not the long-term scenario. In behavioral finance, it’s understood that we’re very myopic. We just go with whatever is in front of us.

Now, I’m very strategic in involving clients in the planning process and in return assumptions. For example, with long-term cash assumptions, if you took 30- or 40-year investment average numbers, the anticipated return for cash is 4 percent. But most people haven’t earned 4 percent on cash since I can’t remember. And the long-term number on corporate bonds is 9 percent. Well, nobody’s earning 9 percent on their corporate bonds. But if you looked back from 1975 to 2015, those are the averages. They’re mathematically accurate based on that time period. But when I say that to people now, they say, “Oh no, you must put zero for cash.” And I say, “Wait a minute, you’re not going to earn zero.”

It’s our job to kind of finesse with them where our goals are.

Another lesson of this is that you need to go back and revisit these things very frequently. I’d say annually. And I didn’t do that at the beginning. I’d go back and revisit them maybe every three to five years. Since things are changing so much, it’s probably a good idea to revisit them annually.